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Press release from CNW Group

Power Financial Corporation Reports 2011 Third Quarter Financial Results and Dividends

Friday, November 11, 2011

Power Financial Corporation Reports 2011 Third Quarter Financial Results and Dividends11:20 EST Friday, November 11, 2011Readers are referred to the sections entitled "Forward-looking Statements" and "Non-IFRS Financial Measures" at the end of this release. The Corporation's financial results are reported under International Financial Reporting Standards (IFRS) and all comparative figures have been restated accordingly.TORONTO, Nov. 11, 2011 /CNW Telbec/ - Power Financial Corporation's operating earnings for the nine-month period ended September 30, 2011 were $1,385 million or $1.84 per share, compared with $1,294 million or $1.73 per share in the corresponding period of 2010. This represents a 6.8% increase on a per share basis.The increase in operating earnings reflects primarily the increase in the contribution from the Corporation's subsidiaries Great-West Lifeco Inc. (Lifeco) and IGM Financial Inc. (IGM).For the nine-month period ended September 30, 2011, other items represented a charge of $118 million and consisted mainly of the Corporation's share (in the amount of $133 million) of Pargesa Holding SA's (Pargesa) impairment charge recorded in the third quarter on its indirect investment in Lafarge S.A. In the corresponding nine-month period of 2010, other items were a charge of $142 million and consisted mainly of Power Financial's share of a litigation provision recorded by Lifeco, established in the third quarter.Net earnings attributable to common shareholders (including other items and after dividends on perpetual preferred shares) for the nine-month period ended September 30, 2011 were $1,189 million or $1.68 per share, compared with $1,079 million or $1.53 per share in the corresponding period of 2010.THIRD QUARTER RESULTS For the quarter ended September 30, 2011, operating earnings of the Corporation were $454 million or $0.60 per share, compared with $465 million or $0.62 per share in the third quarter of 2010.Other items for the third quarter of 2011 were a charge of $116 million, compared with a charge of $144 million for the same quarter in 2010.Net earnings attributable to common shareholders (including other items and after dividends on perpetual preferred shares) for the quarter ended September 30, 2011 were $312 million or $0.44 per share, compared with $294 million or $0.42 per share in the corresponding period of 2010.RESULTS OF SUBSIDIARIES AND PARJOINTCOGREAT-WEST LIFECO INC.Lifeco reported operating earnings attributable to common shareholders of $1,398 million or $1.473 per share for the nine-month period ended September 30, 2011, compared with $1,354 million or $1.429 per share in the corresponding period of 2010. This represents an increase of 3% on a per share basis.For the three-month period ended September 30, 2011, Lifeco reported operating earnings attributable to common shareholders of $457 million or $0.481 per share, compared with $471 million or $0.497 per share in the same period in 2010.Operating earnings for the third quarter of 2010 exclude the impact of an incremental litigation provision, established in the quarter, in the amount of $225 million after tax ($204 million attributable to Lifeco's common shareholders or $0.216 per common share, and $21 million to Lifeco's non-controlling interests).Lifeco's contribution to Power Financial's operating earnings was $956 million for the nine-month period ended September 30, 2011, compared with $930 million in the corresponding period in 2010. For the three-month period ended September 30, 2011, Lifeco's contribution to Power Financial's operating earnings was $312 million, compared with $323 million in the same period in 2010.IGM FINANCIAL INC.IGM reported operating earnings available to common shareholders for the nine months ended September 30, 2011 of $637 million or $2.46 per share, compared with $549 million or $2.08 per share in the same period in 2010, an increase of 18.3% on a per share basis.For the three-month period ended September 30, 2011, IGM reported operating earnings available to common shareholders of $213 million or $0.82 per share, compared with $181 million or $0.69 per share for the same period in 2010, an increase of 18.8% on a per share basis.On September 2, 2011, Mackenzie Financial Corporation, a subsidiary of IGM, announced that it had entered into an agreement to sell M.R.S. Trust Company and M.R.S. Inc. (together, MRS). Other items for the three and nine months ended September 30, 2011 consisted of the net earnings of MRS of $31 million and $33 million, respectively, which have been classified as discontinued operations.Net earnings available to common shareholders, including other items, for the nine months ended September 30, 2011 were $670 million or $2.58 per share, compared with $541 million or $2.05 per share in the corresponding period in 2010. Net earnings available to common shareholders, including other items, for the three months ended September 30, 2011 were $244 million or $0.94 per share, compared with $173 million or $0.66 per share in the same period of 2010.IGM's contribution to Power Financial's operating earnings was $367 million for the nine-month period ended September 30, 2011, compared with $313 million in the same period in 2010. For the three-month period ended September 30, 2011, IGM's contribution to Power Financial's operating earnings was $121 million, compared with $104 million in the corresponding period of 2010.PARJOINTCO N.V.Power Financial holds a 50% interest in Parjointco N.V., which in turn held a 56.5% interest in Pargesa as at September 30, 2011. Pargesa reported operating income for the nine-month period ended September 30, 2011 of SF319 million, compared with SF440 million in the corresponding period in 2010. For the three-month period ended September 30, 2011, operating income was SF109 million, compared with SF219 million in the corresponding period of 2010.Pargesa's operating income declined in 2011 mainly as a result of the weakening of the euro against the Swiss franc.Expressed in Canadian dollars, the contribution from Pargesa to Power Financial's operating earnings was $103 million for the nine-month period ended September 30, 2011, compared with $114 million for the corresponding period in 2010. For the three-month period ended September 30, 2011, the contribution from Pargesa to Power Financial's operating earnings was $36 million, compared with $59 million in the third quarter of 2010.Pargesa's non-operating income (other items) was a charge of SF423 million for the nine-month period ended September 30, 2011 and is composed mainly of its share of the impairment charge on its indirect investment in Lafarge. Non-operating income of Pargesa was SF8 million in the nine-month period ended September 30, 2010.Pargesa reported a net loss of SF104 million in the nine-month period ended September 30, 2011, compared with net earnings of SF448 million in the same period of 2010. For the third quarter of 2011, Pargesa reported a net loss of SF306 million, compared with net earnings of SF218 million in the third quarter of 2010.DIVIDENDS ON PREFERRED SHARESThe Board of Directors today declared quarterly dividends on the Corporation's preferred shares, as follows:TYPE OF SHARESRECORD DATEPAYMENT DATEAMOUNTSeries AJanuary 25, 2012February 15, 2012To be determined in accordance with the articles of the CorporationSeries DJanuary 10, 2012January 31, 201234.375¢Series EJanuary 10, 2012January 31, 201232.8125¢Series FJanuary 10, 2012January 31, 201236.875¢Series HJanuary 10, 2012January 31, 201235.9375¢Series IJanuary 10, 2012January 31, 201237.50¢Series KJanuary 10, 2012January 31, 201230.9375¢Series LJanuary 10, 2012January 31, 201231.875¢Series MJanuary 10, 2012January 31, 201237.50¢Series OJanuary 10, 2012January 31, 201236.25¢Series PJanuary 10, 2012January 31, 201227.50¢DIVIDEND ON COMMON SHARESThe Board of Directors also declared a quarterly dividend of 35 cents per share on the Corporation's common shares payable February 1, 2012 to shareholders of record December 30, 2011.For purposes of the Income Tax Act (Canada) and any similar provincial legislation, all of the above dividends on the Corporation's preferred and common shares are eligible dividends.Forward-Looking StatementsCertain statements in this News Release, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect the Corporation's current expectations, or with respect to disclosure regarding the Corporation's public subsidiaries, reflects such subsidiaries' disclosed current expectations. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Corporation's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of the Corporation and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "plans", "believes", "estimates", "seeks", "intends", "targets", "projects", "forecasts" or negative versions thereof and other similar expressions, or future or conditional verbs such as "may", "will", "should", "would" and "could".By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the Corporation's and its subsidiaries' control, affect the operations, performance and results of the Corporation and its subsidiaries and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, management of market liquidity and funding risks, changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates), the effect of applying future accounting changes, business competition, operational and reputational risks, technological change, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, the Corporation's and its subsidiaries' ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, and the Corporation's and its subsidiaries' success in anticipating and managing the foregoing factors. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including that the foregoing list of factors, collectively, are not expected to have a material impact on the Corporation and its subsidiaries. While the Corporation considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect.Other than as specifically required by applicable Canadian law, the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.Additional information about the risks and uncertainties of the Corporation's business and material factors or assumptions on which information contained in forward-looking statements is based is provided in its disclosure materials, including its most recent Management's Discussion and Analysis and Annual Information Form, filed with the securities regulatory authorities in Canada, available at www.sedar.com.Non-IFRS Financial MeasuresIn analyzing the financial results of the Corporation and consistent with the presentation in previous years, net earnings are subdivided into the following components:operating earnings; andother items, which include the after-tax impact of any item that management considers to be of a non-recurring nature or that could make the period-over-period comparison of results from operations less meaningful, and also include the Corporation's share of any such item presented in a comparable manner by Lifeco or IGM.Management has used these financial measures for many years in its presentation and analysis of the financial performance of Power Financial, and believes that they provide additional meaningful information to readers in their analysis of the results of the Corporation.Operating earnings and operating earnings per share are non-IFRS financial measures that do not have a standard meaning and may not be comparable to similar measures used by other entities.POWER FINANCIAL CORPORATION                     CONDENSED CONSOLIDATED BALANCE SHEETS          (unaudited)[in millions of Canadian dollars]September 30,2011 December 31,2010 January 1,2010Assets     Cash and cash equivalents2,973 3,656 4,855Investments      Bonds79,714 73,582 67,388 Mortgages and other loans20,947 20,209 20,613 Shares6,218 6,415 6,392 Investment properties3,238 2,959 2,615 110,117 103,165 97,008Loans to policyholders7,144 6,827 6,957Funds held by ceding insurers10,118 9,856 10,984Reinsurance assets2,220 2,533 2,800Investment in associates2,135 2,448 2,829Deferred tax assets1,269 1,249 1,300Other assets7,211 7,179 7,065Assets held for sale898 - -Intangible assets4,311 4,231 4,359Goodwill8,771 8,713 8,655Segregated funds for the risk of unit holders94,053 94,827 87,495Total assets251,220 244,684 234,307      Liabilities     Insurance contract liabilities114,070 107,367 104,988Investment contract liabilities784 791 841Deposits and certificates149 835 907Funds held under reinsurance contracts177 149 331Obligation to securitization entities3,554 3,505 3,310Debentures and other borrowings5,887 6,313 5,931Capital trust securities and debentures531 535 540Preferred shares of the Corporation- - 300Preferred shares of subsidiaries- - 199Deferred tax liabilities1,126 1,136 1,018Other liabilities7,782 7,636 6,967Liabilities held for sale659 - -Insurance and investment contracts on account of unit holders94,053 94,827 87,495Total liabilities228,772 223,094 212,827      Equity     Stated capital      Perpetual preferred shares2,005 2,005 1,725 Common shares639 636 605Retained earnings10,478 10,005 9,546Reserves190 188 969Total shareholders' equity13,312 12,834 12,845Non-controlling interests9,136 8,756 8,635Total equity22,448 21,590 21,480Total liabilities and equity251,220 244,684 234,307CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS Three months ended September 30 Nine months ended September 30(unaudited)[in millions of Canadian dollars, except per share amounts]2011 2010 2011 2010Revenues       Premium income        Gross premiums written5,059 4,956 14,980 15,091 Ceded premiums(667) (643) (2,021) (1,953)Total net premiums4,392 4,313 12,959 13,138Net investment income        Regular net investment income1,338 1,496 4,208 4,265 Change in fair value2,091 2,641 2,615 5,387 3,429 4,137 6,823 9,652Fee income1,305 1,261 4,047 3,854Total revenues9,126 9,711 23,829 26,644        Expenses       Policyholder benefits3,704 3,557 11,484 11,305Policyholder dividends and experience refunds385 382 1,115 1,116Change in insurance and investment contract liabilities2,737 3,418 4,104 7,226 6,826 7,357 16,703 19,647Commissions564 529 1,742 1,623Operating expenses861 1,219 2,587 2,971Financing charges100 107 309 325Total expenses8,351 9,212 21,341 24,566 775 499 2,488 2,078Share of earnings (losses) of investment in associates(97) 59 (32) 116Earnings before income taxes678 558 2,456 2,194Income taxes116 73 477 412Net earnings before non-controlling interests -continuing operations562 485 1,979 1,782Net earnings before non-controlling interests -discontinued operations        31 - 33 -Net earnings before non-controlling interests593 485 2,012 1,782Attributable to non-controlling interests(255) (164) (745) (630)Net earnings attributable to shareholders338 321 1,267 1,152Perpetual preferred share dividends(26) (27) (78) (73)Net earnings attributable to common shareholders312 294 1,189 1,079        Earnings per common share        Net earnings attributable to common shareholders         - Basic0.44 0.42 1.68 1.53  - Diluted0.44 0.41 1.66 1.52         Net earnings from continuing operations to common shareholders         - Basic0.41 0.42 1.65 1.53  - Diluted0.41 0.41 1.63 1.52        SEGMENTED INFORMATION          INFORMATION ON PROFIT MEASUREThree months ended September 30, 2011Lifeco IGM Parjointco Other TotalRevenues         Premium income4,392 - - - 4,392Net investment income          Regular net investment income1,330 34 - (26) 1,338 Change in fair value2,080 11 - - 2,091 3,410 45 - (26) 3,429Fee income704 628 - (27) 1,305 8,506 673 - (53) 9,126Expenses         Policyholder benefits, dividends and experience refunds, and change ininsurance and investment contract liabilities6,826 - - - 6,826Commissions372 219 - (27) 564Operating expenses693 156 - 12 861Financing charges72 24 - 4 100 7,963 399 - (11) 8,351 543 274 - (42) 775Share of operating earnings of investment in associates- - 36 - 36Share of non-operating earnings of investment in associates- - (133) - (133)Earnings before income taxes543 274 (97) (42) 678Income taxes54 62 - - 116Contribution to net earnings before non-controlling interests -continuing operations489 212 (97) (42) 562Contribution to net earnings before non-controlling interests -discontinued operations- 31 - - 31Contribution to net earnings before non-controlling interests489 243 (97) (42) 593Attributable to non-controlling interests(176) (106) - 27 (255)Contribution to net earnings attributable to common shareholders313 137 (97) (15) 338          Three months ended September 30, 2010Lifeco IGM Parjointco Other TotalRevenues         Premium income4,313 - - - 4,313Net investment income          Regular net investment income1,493 16 - (13) 1,496 Change in fair value2,629 12 - - 2,641 4,122 28 - (13) 4,137Fee income681 604 - (24) 1,261 9,116 632 - (37) 9,711Expenses         Policyholder benefits, dividends and experience refunds, and change ininsurance and investment contract liabilities7,357 - - - 7,357Commissions346 207 - (24) 529Operating expenses1,057 149 - 13 1,219Financing charges71 28 - 8 107 8,831 384 - (3) 9,212 285 248 - (34) 499Share of operating earnings of investment in associates- - 55 - 55Share of non-operating earnings of investment in associates- - 4 - 4Earnings before income taxes285 248 59 (34) 558Income taxes- 73 - - 73Contribution to net earnings before non-controlling interests -continuing operations285 175 59 (34) 485Contribution to net earnings before non-controlling interests -discontinued operations- - - - -Contribution to net earnings before non-controlling interests285 175 59 (34) 485Attributable to non-controlling interests(101) (76) - 13 (164)Contribution to net earnings attributable to common shareholders184 99 59 (21) 321          Nine months ended September 30, 2011Lifeco IGM Parjointco Other TotalRevenues         Premium income12,959 - - - 12,959Net investment income          Regular net investment income4,173 106 - (71) 4,208 Change in fair value2,600 15 - - 2,615 6,773 121 - (71) 6,823Fee income2,163 1,963 - (79) 4,047 21,895 2,084 - (150) 23,829Expenses         Policyholder benefits, dividends and experience refunds, and change ininsurance and investment contract liabilities16,703 - - - 16,703Commissions1,139 682 - (79) 1,742Operating expenses2,068 482 - 37 2,587Financing charges216 80 - 13 309 20,126 1,244 - (29) 21,341 1,769 840 - (121) 2,488Share of operating earnings of investment in associates- - 103 - 103Share of non-operating earnings of investment in associates- - (135) - (135)Earnings before income taxes1,769 840 (32) (121) 2,456Income taxes284 197 - (4) 477Contribution to net earnings before non-controlling interests -continuing operations1,485 643 (32) (117) 1,979Contribution to net earnings before non-controlling interests -discontinued operations- 33 - - 33Contribution to net earnings before non-controlling interests1,485 676 (32) (117) 2,012Attributable to non-controlling interests(528) (293) - 76 (745)Contribution to net earnings attributable to common shareholders957 383 (32) (41) 1,267          Nine months ended September 30, 2010Lifeco IGM Parjointco Other TotalRevenues         Premium income13,138 - - - 13,138Net investment income          Regular net investment income4,245 75 - (55) 4,265 Change in fair value5,365 22 - - 5,387 9,610 97 - (55) 9,652Fee income2,108 1,820 - (74) 3,854 24,856 1,917 - (129) 26,644Expenses         Policyholder benefits, dividends and experience refunds, and change ininsurance and investment contract liabilities19,647 - - - 19,647Commissions1,064 633 - (74) 1,623Operating expenses2,480 452 - 39 2,971Financing charges215 83 - 27 325 23,406 1,168 - (8) 24,566 1,450 749 - (121) 2,078Share of operating earnings of investment in associates- - 112 - 112Share of non-operating earnings of investment in associates- - 4 - 4Earnings before income taxes1,450 749 116 (121) 2,194Income taxes215 198 - (1) 412Contribution to net earnings before non-controlling interests -continuing operations1,235 551 116 (120) 1,782Contribution to net earnings before non-controlling interests -discontinued operations- - - - -Contribution to net earnings before non-controlling interests1,235 551 116 (120) 1,782Attributable to non-controlling interests(444) (243) - 57 (630)Contribution to net earnings attributable to common shareholders791 308 116 (63) 1,152   For further information: Attachments:  Financial Information   For further information, please contact:  Mr. Edward Johnson Senior Vice-President, General Counsel and Secretary 514-286-7400